Finance Division to release Tk2,000cr for private power producers to ease dues standoff

The Finance Division will release Tk2,000 crore to the Bangladesh Power Development Board (BPDB) within the next few days to help clear outstanding dues to private power producers amid escalating tensions over unpaid bills and disputed liquidated damages (LD).

Highlights: TBS

Outgoing Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan came up with the announcement in Dhaka yesterday.

"Power producers will receive payments very soon," Fouzul said, acknowledging the strain caused by mounting arrears.

The dispute centres on BPDB's decision to calculate and impose liquidated damages for the past 30 months – a move strongly opposed by private producers. 

The adviser noted that producers had challenged the decision before the Bangladesh Energy Regulatory Commission (BERC) but were unsuccessful.

"Power producers went to BERC challenging the decision, but they lost there. BPDB is now working on the issue to determine how to resolve both the LD and the outstanding bills," he said.

BPDB Chairman Md Rezaul Karim confirmed that the state utility has been calculating LDs for the past 30 months. He said outstanding bills would be settled only after the calculations are finalised.

"We will pay the outstanding bills owed to power producers once the LDs are calculated," he said, adding that some claims may not stand scrutiny after adjustments, though certain plants could receive payments following reconciliation.

The Bangladesh Independent Power Producers' Association (BIPPA), however, has warned that prolonged non-payment could force plants to shut down. 

At a recent press conference, the association claimed that Tk13,000-14,000 crore in dues to local independent power producers (IPPs) remain unpaid. Including joint-venture plants, total arrears could exceed Tk25,000 crore.

The association warned that if at least 60% of the arrears are not settled immediately, producers may have no option but to shut down their plants.

"We will keep supplying power, but BPDB will not pay us. Who will make such a suicidal decision of spending money to generate electricity when they are not being paid?" said BIPPA President David Hasanat.

Hasanat criticised the retroactive calculation of LDs, calling it "absurd," and said the association has challenged the imposition of LD in the High Court. He alleged that LD rules are being applied in a discriminatory manner, targeting domestic entrepreneurs while foreign and joint-venture producers are treated differently.

Under Clause 13.2(1) of the Power Purchase Agreement, BPDB is required to settle bills within 40 days of submission. BIPPA claims payments are currently delayed by eight to 10 months, severely straining producers' finances.

According to the association, the payment crisis has already caused losses of around Tk8,000 crore due to currency fluctuations and rising borrowing costs. "Our borrowing costs have exploded. Fuel imports, loan servicing, opening LCs – everything," Hasanat said.

Energy analysts have warned that any disruption in oil-fired power generation could worsen electricity shortages, particularly during the peak summer months.

Shafiqul Alam, lead analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis (IEEFA), said oil-fired plants accounted for 10.73% of total generation on average in the last fiscal year. Between March and May, their contribution rose to between 11.27% and 12.5%.

"If power supply from oil-fired power plants stops due to the dispute over outstanding bills, there will be severe load-shedding in the summer season," Alam warned, noting ongoing dollar shortages and logistical constraints in handling liquefied natural gas.

Last summer, oil-fired plants generated between 3,000MW and 3,500MW in peak months. This year, output could exceed 4,000MW, according to Imran Karim, former president of BIPPA.

"If the government wants to settle the dispute between BPDB and power producers, it should move away from vindictiveness and adopt a rational approach," he said.